Food prices soar 32% in 60 Days – What is the Government Doing ?

August 12, 2009

Despite the wholesale prices based inflation being in the negative zone for more than two months, India’s food prices continue to remain high. As per the latest figures, annual inflation was -1 .58 for the week ended July 25 [Old Data needs to be revamped, total disconnect with current World]. However, it has had little impact on prices of essential food items that continues to soar.

According to an analysis of 14 essential commodities collated by the ministry of consumer affairs, retail food prices have surged 32% in the country in the months of June-July compared to 18% in the corresponding period in 2008. However, WPI based inflation has been negative through most of this period.

The main reason for the spike in food prices this year is understood to be poor rains as the monsoon remains much weaker than expected. According to the India Meteorological Department (IMD), overall rainfall so far has been about 28% below the long period average (LPA). The IMD on Monday further lowered its monsoon forecast for a second time since June to 87% of the LPA compared with its June 24 forecast of 93%.

The government has been looking to control the soaring prices by improving supply in the market. It has already allowed duty free import of raw sugar and is also planning to import pulses and edible oils through the state run agencies. However, so far the measures have failed to show any convincing results. With the festival season around the corner, if left unchecked, food prices may spike further raising concerns of trigging a runaway inflation in the broader economy as well.